In last week's market monitor on OptionInvestor.com, I mentioned shares of Citigroup (NYSE:C) $41.55 -1.04% as a stock bears might look to trade to the downside on weakness in the Dow Industrials (INDU). Monday's trade at $42 set off the "bearish triangle" pattern on C's point and figure chart and has the stock looking further vulnerable to downside action.
According to Dorsey/Wright and Associates, the banking group is still "bull confirmed" with 88% of the banking stocks showing a buy signal on their point and figure charts. However, Citigroup (C) isn't one of them and thus a place for bears to be looking short/put.
Today's action has seen Citigroup (C) trade in positive territory earlier in the session, but not long after our recent discussion about the bearish technicals, the stock has broken below yesterday's low. With the Dow Industrials still holding onto gains, today's action in C is perhaps further sign that the stock is under distribution.
Citigroup Chart - Daily Interval
Shares of C have turned lower despite gains in the Dow Industrials. One reason the stock may be DIVERGING from bullishness in other parts of the banking sector is that C has vast amounts of global exposure. It would well be that the recent decline in the U.S. dollar are having an adverse impact on how the MARKET perceives C. We've noted in recent months that the regional banks, that lack global exposure have performed strong.
A bear in Citigroup would love nothing more than the entire banking sector to begin weakening and have the internals as depicted by the banking bullish % from Dorsey Wright & Associates reverse course from an "overbought" level of 86%. Should that take place, it could act like a sledge hammer and drive the weaker C into the ground and toward a bearish traders targets.
We've noted in past commentary that the vertical count from C's point and figure chart is bearish to $31. The recent bearish triangle is profitable 87.5% of the time, for an average gain of 33.3% in a 2.5 month time span. While the banking sector is still in a bullish condition, the broader S&P 500 Bullish % ($BPNDX) from www.stockcharts.com just reversed into "bear confirmed" status, giving the bearish trader in C further reason to be looking for he stock to decline. A 33.3% decline from the $42 level could also be used to establish a bearish target of $28.04. Between the bearish vertical count of $31 and probabilities study from Professor Davis of $28.01, a target range is identified. A stop just above the $43.87 level would be used to help control risk in a bearish trade.